mployees walk along a corridor in the Infosys campus in Bangalore (Image: Reuters)
Shares of Infosys rose as much as 2.9 percent in morning trade on Monday after the Board appointed Salil Parekh as its new Chief Executive Officer and Managing Director (CEO & MD) of the company effective January 2, 2018, over the weekend.
The stock, which has given a flat return in the calendar year 2017, could well scale Rs 1,100 levels in the next 12 months, experts suggest. Most analysts remain fairly optimistic about the appointment of Parekh, who is no stranger to the IT industry. The appointment of the new CEO at Infosys will remove the uncertainty and put the stock back on investors’ radar.
The former Capgemini executive was in the race for the top job at Infosys last time as well, when the Indian IT major decided in favour of Vishal Sikka.
“The appointment of Salil Parekh as MD and CEO of Infosys is a promising choice. Salil brings tenured experience with the added advantage of working in a global firm,” CLSA said in a note. This is perhaps the best of three outcomes for Infosys, said the note.
Parekh had been with Capgemini India for over a decade & a half, starting with EY in 1992 and was part of the consulting business that was acquired by Capgemini in 2000.
"The appointment of Salil Parekh comes in reasonable time after Nilekani’s swift appointment to the Board. This allows Infosys to expedite away from inward focus and start to chase growth in business sooner than later," Motilal Oswal said in a report.
The domestic brokerage firm maintains a buy rating on Infosys with a target price of Rs 1,100 which translates into an upside of about 15 percent from current levels. The domestic brokerage firm is of the view that gradual recovery to normalcy will provide a further case for rerating.
Earlier in October, Infosys’ September performance and FY18 guidance had quelled fears of the impact on business post the leadership exit, and we note that ex-RBS, the midpoint of current guidance is close to industry.
The company has not been underperforming its peers on the front of revenue growth and profitability, but its valuation to peers remained discounted amid the ongoing search for a new leader and concerns around governance, said a report.
“With the appointment of CEO, the uncertainty is over. Majority of IT shares had performed recently but Infosys was lagging behind, but now with the clarity on leadership, the stock should perform well,” Jimeet Modi, Founder & CEO, Samco Securities told Moneycontrol.
“P/E for IT industry is trading at 20-times trailing earnings while Infosys is trading at 15x, a deep discount, which now will get narrowed down. The appointment is positive for the stock both for the short and long-term,” he said.
At 09:46 hrs, Infosys was quoting at Rs 978.70, up Rs 20.20, or 2.11 percent, on the BSE. It touched an intraday high of Rs 986.25 and an intraday low of Rs 969.65.